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Zerodha's Nithin Kamath Thinks 'Buy Now Pay Later' is Not a Good Option. Here's Why

Why Zerodha’s Nithin Kamath thinks 'buy now pay later' may not be good idea for retail investors

Why Zerodha’s Nithin Kamath thinks 'buy now pay later' may not be good idea for retail investors

Nithin Kamath said trading in such BNPL methods not only puts the investor at a greater risk of losing money but also increases the volatility in the market

Advising people against the volatility of the market, Zerodha co-founder Nithin Kamath cautioned retail investors against buying stocks using ‘buy now, pay later’ (BNPL) type financial product. In a series of tweets, Kamath highlighted the risks of margin fund trading and the practice of using stocks as security for a loan.

The entrepreneur wrote that trading in such BNPL methods not only puts the investor at a greater risk of losing money but also increases the volatility in the market. Kamath said that trading in shares with full money upfront allows investors to hold on to their investment for a longer run in case of a market dip. There’s no external pressure to liquidate investment which ultimately will add to the market’s volatility

Kamath lauded market regulator Security and Exchange Board of India (SEBI) and new age stock brokers for not bringing schemes promoting margin trading.

Kamath, however, also shared a concern that if one broker starts offering the BNPL option, others will be forced to follow due to the competition in the segment. “Using this as a hook to generate revenue will not be right for the customers,” he wrote.

He hoped that broking business like others doesn’t morph into a lending business to recover the very high cost of acquiring a customer

Kamath’s advice for retail investors came on a day when the Indian stock market recorded its sharpest dip in months. Equity index Sensex fell 1,170 pints due to the loss in shares like Reliance Industries, Kotak Bank, Bajaj Finance and others. Sensex closed at 58, 465 points after recording a 1.96 per cent fall. NSE Nifty also recorded a similar trend and closed at 17,416.55 points after recording 348.25 points of a 1.96 per cent dip

Kamath along with his brother Nikhil is the richest self-made Indian billionaire under the age of 40 with a wealth of around Rs 24,000 crores. the duo founded Zerodha back in 2010 and a decade later, the company became a unicorn with a self-assessed valuation of over $1 billion.

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first published:November 27, 2021, 11:39 IST